China Becomes World’s Next Top Oil Importer

For most of 2017, China’s crude oil imports exceeded those of the U.S. on a monthly basis. Now Chinese crude oil import volumes also surpassed the American imports in annual figures. China was the top oil importing country in the world last year as it brings more refining capacity online and fills strategic inventories, while domestic oil production continues to decline.

Chinese crude oil imports will continue to grow over the next few years as the use of oil products grow along with the economic and refinery capacity expansion, analysts say. The country’s import dependence is also expected to grow as imports rise and production at home declines.

Last year, China surpassed the U.S. in annual gross crude oil imports, EIA data showed on Monday. China imported on average 8.4 million bpd in 2017, compared with 7.9 million bpd of imports for the United States. In total petroleum and other liquid fuels imports, China had become the top global net importer back in 2013.

Meanwhile, U.S. crude oil imports have been lower than 8.5 million bpd in each month since 2013 when the shale revolution was in its first period of expansion, compared to more than 10 million bpd in monthly imports in many of the years of the 2000s.

The continuous rise in Chinese oil imports is due to several factors, the EIA says. These are declining domestic production, growing oil and liquid fuels consumption, a build-up in strategic reserves, refinery sector reform which allows independent refiners to import quotas of crude oil, and increasing refinery capacity and utilization.

China’s crude oil and other liquids production dropped the most among non-OPEC nations in 2016, and the EIA expects production to have booked the second-biggest such drop last year. Liquids production in China fell by 2 percent annually to 4.8 million bpd last year and is further expected to drop this year and next.

Crude oil production alone fell by an annual 4 percent to 191.51 million tons — or about 3.85 million bpd in 2017 — to the lowest in nine years, due to maturing fields and few viable new discoveries at home.

While China’s production is declining and is expected to further drop in the coming years, its consumption of petroleum and other liquid fuels last year was the world’s largest for the ninth consecutive year, up by 3 percent to 13.2 million bpd, the EIA said.

Refinery capacity and refinery runs also rose in 2017, with refinery runs estimated to have increased by 500,000 bpd to 11.4 million bpd, partly driven by two refinery expansions in the second half of the year.

A total of 1.4 million bpd of new refinery capacity is planned to open in China by the end of 2019, which, combined with pipeline infrastructure expansion, will likely further raise Chinese oil imports.

While China has continued to boost its oil imports in recent years, it has also lessened its dependence on OPEC’s crude oil. According to the EIA, 56 percent of China’s crude oil imports came from OPEC members last year, compared to a peak of 67 percent in 2012. Over those five years, Russia and Brazil significantly boosted their market shares on the Chinese market, with Russia’s rising to 14 percent from 9 percent, and Brazil’s imports went to 5 percent from 2 percent.

Last year, Russia was China’s top oil supplier for a second year running, with Russian crude oil sales up 14 percent and beating OPEC’s leader and largest exporter Saudi Arabia for a second consecutive year.

Russia is expected to retain the top spot this year as well, with Russian crude sales to China likely to grow at least 11 percent, Wang Zhuwei, senior analyst with S&P Global Platts China Oil Analytics, said.

According to Platts analysis, China’s imports from OPEC countries increased by 7.1 percent on the year to 4.7 million bpd in 2017, but OPEC’s market share dropped to 55.8 percent from 57.4 percent in 2016. The market share of Middle Eastern producers in China fell even more — to 43.4 percent from 48 percent.

North America’s share of the Chinese market jumped to 2 percent last year from just 0.2 percent in 2016, as U.S. crude oil exports to China surged to make America the 14th largest supplier to China, Platts says. The U.S. also made it once into China’s top ten suppliers list last year — in October — when it was ninth in terms of crude oil sales to China.

As China continues to increase oil imports, more oil producers will be vying to raise their share of the world’s top crude oil import market.